Annual Report

2016 - 2017

2

Forty-Second Annual Report 2016 – 2017

TO HER HONOUR

The Lieutenant Governor

of the Province of Ontario

MAY IT PLEASE YOUR HONOUR

The undersigned begs respectfully to present to Your Honour the

Annual report of the Algonquin Forestry Authority for the year

beginning April 1, 2016 and ending March 31, 2017.

The Honourable Kathryn McGarry

Minister

THE HONOURABLE KATHRYN MCGARRY

Minister of Natural Resources and Forestry

Honourable Madam:

I have the honour to submit to you the Annual Report of the

Algonquin Forestry Authority for the year beginning April 1, 2016

and ending March 31, 2017.

DAVID STEWART

Chair

3

TABLE OF CONTENTS

Role and Mandate 4

Chair’s Message 5

Description of Activities 6

Harvesting 6

Forest Management 8

Tree Marking 8

Site Preparation, Tree Planting and Scarification 8

Tending and Stand Improvement 9

Silvicultural Effectiveness Monitoring 9

Financial Results 10

Harvesting and the Statement of Operations 11

Forest Renewal Fund 11

Financial Position – Balance Sheet 11

Public Appointments – Board of Directors 12

Organization Chart 13

Audited Financial Statements - Appendix

4

ROLE AND MANDATE

The Algonquin Forestry Authority (AFA) operates under the Algonquin Forestry Authority Act, R.S.O. 1990. The

Authority is a self-financing operational enterprise Crown agency. The Minister of Natural Resources and Forestry is

responsible for the administration of the Algonquin Forestry Authority Act. This legislation sets out the management,

objectives and powers of the AFA.

Ensuring the sustainable management of Algonquin’s forests

Planning of all forestry operations

Harvesting and distribution of wood products to mills

Monitoring forestry operations

All forestry activities are carried out under the direction of a Ministry of Natural Resources and Forestry’s approved

Forest Management Plan (FMP). These activities are subject to an Independent Forest Audit every five years and the

audit results are tabled in the Ontario Legislature and made available to the public. In addition, the Algonquin Park

forest is certified to Canada’s national forest certification standard CSA Z-809. This certification demonstrates the

Authority’s commitment to sustainable forest management and provides the public access to results from annual

independent audits to defined standards.

A key component of the CSA Z-809 standard is the AFA’s environmental and sustainable forest management system

(ESFMS). Key components of the ESFMS are prevention of pollution, sustainable forestry, continual improvement and

compliance with applicable laws and guidelines. AFA receives management direction from several different plans and

legislation, but its Sustainable Forest Management (SFM) Policy guides its day-to-day activities.

AFA’s commitment to SFM can be found in its Vision Statement:

To achieve the highest standards of sustainable forest management practices,

in order to maintain Park values for future generations.

The Authority applies the principles of SFM to balance the public’s concern for protecting Park values. Protection of

recreation, fisheries, wildlife habitat and natural and cultural heritage values is of utmost importance while maintaining

a supply of forest products to mills dependent on Park timber. Harvesting is carefully regulated to minimize impacts on

other forest values. The Authority contracts out both harvesting and forest management work to companies from

communities in the region. The timber harvested supports 12 mills in communities such as Huntsville, Whitney,

Madawaska, Pembroke, Killaloe and Eganville. Another five to ten mills in the region receive periodic supplies.

5

CHAIR’S MESSAGE

By David Stewart

I am pleased to present this Annual Report outlining Algonquin Forestry Authority (AFA) operations for the 2016-2017

operating year. This report marks AFA’s 42nd year of delivering sustainable forest management in Algonquin Provincial

Park. The Authority is committed to its mandate and the important economic, social and environmental benefits

derived from this iconic forest.

Demand for timber that we produce has continued to trend positively with Ontario’s growing economy. We remain optimistic the economic opportunities will continue as we move forward with strategies to grow our productive capacity and improve upon achieving important financial and forest management targets. During the year separate independent audits were completed on finance and administration, and environmental performance. The Office of the Auditor General’s audited financial report is provided herein. The AFA’s Environmental and Sustainable Forest Management System is certified to the CSA Z809 national forestry standard. I am happy to report that all of these audits have had successful outcomes and we continue on a path of continual improvement. The Board is satisfied with the financial statements in this annual report and that the AFA’s mandate and business plan objectives have been met. In April of 2016 the Algonquin Park Forest Certification Advisory Group was recognized and presented with the Program for the Endorsement of Forest Certification (PEFC) Canada Stewardship Award (cover photo) for their outstanding leadership and dedication to Sustainable Forest Management in Algonquin Provincial Park. We are proud of the working relationships forged with stakeholders including Indigenous communities in sustainable forest management planning processes.

This year also marked the retirement of key AFA staff and subsequent recruitment exercises. Retiring were; Invoice Clerk Carolyn Wood, Area Manager Bill Hubbert and IT/IM Supervisor Peter Vanderkraan. Incoming staff were; Area Manager Keith Fletcher and Area Forester Tracey Bradley. We wish them well in all of their future endeavours. Photo L to R, AFA directors, Pineau, Lemkay, Lauer, Bros, Stewart. Nicholas Hill, Prince of Wales

Forest Leadership intern, General Manager Leavey, Treasurer Doyle, and outgoing AFA director

LeClerc.

As Chair of the Authority, I am grateful for the dedicated members of the

governing Board of Directors and their contributions of leadership, oversight and advice to management and staff. An

effective group, representing valuable work and life experience from a variety of perspectives, we have met every few

months or when the need arises. During this year, we wished past-director Karen LeClerc all the best in her retirement,

and welcomed new appointees; Gordon Clark, Carl Corbett, Damion Ketchum, Sarah Morgan-White and Rodney Smith.

Please see page 10 of this report for a complete list of meetings and directors serving during this term.

On behalf of the AFA Board, I would like to congratulate all forestry contractors, their employees, and AFA staff for their

part in meeting the Authority’s objectives and for their continued dedication to sustainable forest management in the

Algonquin Park Forest.

Sincerely,

6

DESCRIPTION OF ACTIVITIES

The activities of the Algonquin Forestry Authority are described primarily as harvesting and sustainable forest

management. As the Authority is self-financing, it relies on sales of forest products harvested to fund all aspects of its

operations including forest management activities such as forest access, renewal and tending operations. The next

sections titled harvesting and forest management outline specific activities and a brief discussion of annual operational

performance levels and target achievement. Targets discussed herein are set out in the agency’s 2016 to 2019 business

planning document.

Factors affecting achievement of objectives are market demand for forest products, weather conditions, Algonquin Park

recreational and biological timing limitations on operating. Business planning and budget setting are conducted 3-6

months prior to the beginning of AFA’s fiscal year start in April, which is also another six months before full production

is underway. Most of the harvest is conducted between September and March, while forest management activities

begin in May and are mostly concluded in December.

The approved forest management plan and AFA’s sustainable forest management plan also set targets to which

operational performance is measured and reported in separate reporting documents as required by the Crown Forest

Sustainability Act (CFSA) and Canadian Standards Association (CSA) Z-809 standard requirements, respectively.

Harvesting The approved 2010-2020 Forest Management Plan for the Algonquin Park Forest states that a sustainable annual harvest

of 783,075 cubic metres (m3) is available from the forest. The 2016-2019 AFA Agency Business Plan set out a planned

level of 500,000 m3 for 2016-2017 based on economic and operational factors. The 2016-2017 harvest from the forest

was 439,691 green metric tonnes (source: AFA Sales System) or approximately 427,158 m3 (source: AFA year-end wood

measurement calculations), which is well within the sustainable level that the Algonquin forest can provide, yet

reflective of harvest levels in a recovering economy.

2016-2017 Monthly Deliveries (Sales) vs. Business Plan Budgeted Values (green metric tonnes)

This year’s harvest level was 85% of business planned levels, the same as in 2015/16. Monthly delivery (sales) targets are

compared to monthly budgeted values in the preceding chart.

0

10000

20000

30000

40000

50000

60000

70000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Inv

2016-2017

BUDGET

7 Spring inventories developed as planned in March of the previous fiscal year and provided near-budget sales in April and

May. June through September deliveries were above budget reflecting delivery of remaining inventory, implementation

of additional capacity and earlier starts for most contractors.

Rains in the fall, and mild temperatures throughout the winter slowed harvest and hauling to mills as displayed in the

chart above. Although deliveries slowed, harvesting proceeded to build inventory that was stockpiled on site or in

concentration yards for delivery as winter road conditions allowed, or to be carried forward into the next fiscal year.

Subsequently, inventoried volume exceeded planned targets and the progress made to increase our productive capacity

is not reflected in sales volume figures. Inventoried volume is not reported in our sales system until finally sold in the

next fiscal year. Volume harvested and delivered in 2016-2017 is illustrated by broad product category in the following

graph and is compared to the annual available harvest (described in the FMP) and harvest/sales performance from the

previous three years.

There is a larger proportion of pulpwood quality timber available from the forest than other products. Harvesting and

sales of pulpwood quality timber (firewood & fibre) has been less than in 2015/16, although much of the inventory is

pulpwood. Access to the sawlog and better forest products is often limited by a lack of economical pulpwood markets.

In this term, utilization of pulpwood quality material (much of it in inventory) has been followed by increased recovery

and sales of sawlogs (softwood sawlogs +26%, hardwood sawlogs +57%) over the previous year.

The Authority’s 2016-2019 Agency Business Plan identifies strategies to increase production. Generally, to develop

existing contractor capacity, secure new contractors and provide additional effort and investment in terms of human

and financial resources in response to increasing demands for forest products in all areas.

The Authority retains a professional and responsible work force to achieve its objectives and as such actively promotes

safe and effective work practices. W. F. Dombroski & Sons Logging Contractors of Barry’s Bay, ON was awarded the

annual Safety Award for the 2016/17 season, a repeat performance from the previous three years. This award is

presented annually to the Algonquin Park logging contractor maintaining the best safety record. In addition to the

safety award, AFA and the contractors administer an “Environmental and Safety Award System” that recognizes

positive work practices. Based on the point system, the top logging crews and operators on each contractor operation

0

200,000

400,000

600,000

800,000

AnnualAvailable

2016-2017 2015-2016 2014-2015 2013-2014

Vo

lum

e (m

3)

Annual Harvest Levels

Pulpwood Softwood Sawlogs Hardwood Sawlogs Veneer/Poles

8 are formally recognized. The hauling and road construction sectors are also recognized for their contributions to the

overall results.

Forest Management The approved 2010-2020 Forest Management Plan (FMP) for the Algonquin Park Forest details the goals, objectives and

strategies for the ten-year period and outlines specific operations for two 5- year terms. The Authority is operating in

the second term, 2015-2020. Forest management activities in Algonquin Park must follow FMP prescriptions. Targets

set out in the FMP are further refined in the Agency Business Plan (see the following table) as required to reflect

economic and operational considerations.

AFA Harvest & Forest Management Programs – 2016-2017 Budget versus Actual

Program 2016/17

Budget

2016/17

Actual

Harvest (m3) 500,000 427,158

Silvicultural Activities

Silvicultural Effectiveness

Monitoring Surveys (ha)

4,900 3,200

Scarification (ha) 55 0

Site preparation (ha) 390 195

Stand Improvement (ha) 3,520

3,070

Tending (ha) 525 1,648

Tree marking (ha) 7,500 7,519

Tree planting (# trees‘000s) 615 611

Tree planting stock (‘000s) 425 709

Tree seed collection (hl) 58 0

Forest management activities such as prescription setting and tree marking occur in advance of harvesting at a level

sufficient to provide for planned harvest operations. Forest renewal activities that follow the harvest, such as site

preparation and tending reflect actual harvest levels in preceding years and subsequent actual renewal treatment

needs. The partial harvesting systems predominantly used in Algonquin Park rely heavily on natural regeneration. To

date, this has been largely successful.

Tree Marking

To implement forest management systems in Algonquin Park it is first necessary to designate which trees are to be

harvested and which ones are to be retained, while protecting other resource values. This is done by skilled tree

markers who follow the prescriptions prepared by Registered Professional Foresters in the Forest Management Plan.

Tree marking was carried out on 7,519 hectares in 2016/17 representing 100% of business planned levels and was sufficient

to provide for the actual area harvested and some marking for the upcoming year.

Site Preparation, Tree Planting and Scarification

Trees planted in Algonquin Park are grown from seed sources appropriate for planting within the Park. No seed

collection occurred in 2016/17 due to the poor seed crop observed throughout the Park. A review of stored seed

inventories reveals sufficient volume of seed for our near term growing stock needs. A total of 611,342 tree seedlings

9 were planted on 470 hectares in 2016/17 representing target achievement of 99%. A significant portion of the areas

planted in 2016/17 originated from windstorm damage and required a higher-than-expected density of trees to be

planted due to the open nature of the sites. Average density for the 2016/17 tree plant was 1,300 trees per hectare.

195 hectares were site prepared for planting in future years, which is 50% of planned. The site preparation program for

2016/17 was reduced due to unplanted area carried forward from the 2015/16 site preparation program. Program

reduction was required to ensure all site prepared areas are planted in 2017/18. Private nurseries are growing seedlings

under contract with AFA for planting in upcoming years. To ensure all available site prepared areas are treated in a

timely manner, additional stock was required (709k compared to 425k budgeted) and a summer plant is scheduled for

2017/18 in addition to the spring plant. Program increases reflect site preparation and tree planting needed to ensure

harvested areas are successfully regenerated. Most areas harvested regenerate naturally. Sometimes scarification is

conducted to prepare seedbeds for natural regeneration and timed with good seed crops. No scarification work was

required on sites this year. Seed crop forecasting indicates better prospects in 2017/18.

Tending and Stand Improvement

Manual tending was performed on 338 hectares to release established white pine and red pine regeneration from

competing vegetation. A further 83 hectares of white pine, red pine and jack pine were pre-commercially thinned and

1,227 hectares of even-aged understory improvement work was completed in order to improve light conditions for

regeneration establishment. This represents more than triple the tending target, a function of receiving special project

funding from the Forestry Futures Trust Fund and renewal treatment needs identified through silviculture effectiveness

monitoring. This tending work is essential to protect the investments made in regeneration. Stand improvement was

completed on 3,070 hectares to assist growth of residual trees and natural regeneration in areas managed under the

selection system. This is 87% of business planned levels. This is a significant increase over 2015/16 as treatment areas

originating from previous fiscal years were treated in 2016/17. Stand improvement may also be carried out concurrently

with harvest operations, without the need for renewal account funding, such as when firewood and pulpwood markets

are strong. Only funded stand improvement is budgeted and reported.

Silvicultural Effectiveness Monitoring

Regeneration assessments were conducted on over 3,200 hectares to ensure that regeneration treatments are

progressing as planned. Results of ‘Free to Grow’ assessments are reported in the Management Unit Annual Report to

MNRF in November each year and available to the public. Additionally, all selection management areas have received

tree marking and audits to ensure appropriate results to predetermined standards. Regeneration assessments

conducted (excluding tree marking audits) represent 65% of planned surveys. The annual monitoring target was set

higher than required, based on initial planning information. Actual annual monitoring is reflective of harvest progress

and scheduling of treatments. Targets have been reduced from FMP targets based on additional information and a

better understanding of survey needs on an annual basis.

The 2016/17 forest management program is illustrated on the next page and is compared to annual FMP targets. The

program is the seventh year of the approved 2010-2020 FMP.

The Authority is satisfied with its operational and forest management performance relative to annual harvest levels.

Development and revision of targets to ensure achievement of FMP and CSA SFM targets are completed within the

business planning, work planning and budgetary processes.

10

FINANCIAL RESULTS

AFA Financial Performance – 2016-2017 Budget versus Actual

2016/17

Budget

General Fund

$ (000s)

2016/17

Budget

Renewal Fund

$ (000s)

2016/17

Budget

Total

$ (000s)

2016/17

Actual

General Fund

$ (000s)

2016/17

Actual

Renewal Fund

$ (000s)

2016/17

Actual

Total

$ (000s)

Revenue 25,659 2,316 27,975 25,168 1,947 27,115

Expense 23,856 1,823 25,679 23,112 1,507 24,619

Operating

Income

1,803 493 2,296 2,056 440 2,496

Administrative

& Other

1,747 409 2,156 1,557 325 1,882

Net Income

<Loss>

56 84 140 499 115 614

11

Harvesting and the Statement of Operations The following commentary references financial information in the Audited Financial Statements and the summarized table on the

previous page to compare with budgeted targets.

Operating revenues for the year were $27,114,976 which represents an increase of $1,355,579 or 5.3 % compared to 2015/16. Demand

for our contractor produced forest products increased by 2.9% during the year and slightly higher stumpage and selling prices were

achieved resulting in a 5.5% increase in product sales dollars. Standing timber sales volumes decreased by 9.6% in 2016/17 but the

increase in the quality of products produced and their related stumpage resulted in revenue increases of about 5.4%.

"Other revenue" of $2,798,500 as compared to $2,541,080 in 2015/16 has been itemized in Note 10.

Costs for contracted production, direct labour and stumpage were higher than the previous year due to increased production levels,

but lower than budget. Combined with slightly increased spending on public access road maintenance and operations planning, the

results show a decline in operating income to $2,496,198 as compared to $2,857,988 in the previous year, but closer to budget.

Operations planning costs associated with our Environmental Management System, CSA certification and the FMP process were

$272,003 as compared to $275,180 in the previous year.

Administration costs for the year were $1,882,147 which represents a decrease of $14,162 or 0.8% compared to 2015/16. The decrease

is primarily related to senior staff retirements during the year that resulted in reduced salaries and benefits. These savings were

partially offset by increases in amortization, director expenses and staff travel.

Forest Renewal Fund The method of accounting for Crown Stumpage reflects the requirements of the Crown Forest Sustainability Act. The forest renewal

portion of the Crown Stumpage Matrix is retained by the Authority, in trust for the Crown, and is to be used to fund eligible forest

renewal work on a cost recovery basis. The legal framework for forest renewal obligations are set out in the Algonquin Park

Forestry Agreement for the period April 1, 2015 to March 31, 2035, as amended October 17, 2016.

The forest renewal revenue of $1,729,884 ($1,802,007 in 2015/16) from stumpage represents amounts actually charged to customers

during the year for renewal fund purposes. Higher sales volumes of about 1.7% have not resulted in increased renewal revenue as a

result of changes in the species mix.

Actual forest renewal expenditures incurred during the year amounted to $1,831,254 as compared to $1,856,835 in 2016.

Total revenue in the renewal fund of $1,946,559 ($2,124,617 in 2015/16) has been sufficient to cover the costs of renewal operations

and administration in this term. This is the fourth consecutive year of a surplus $115,305 ($267,782 in 2015/16) after eight consecutive

years of losses.

Financial Position- Balance Sheet

The Statement of Financial Position disclosure reflects disclosure requirements affecting government not-for-profit organizations,

such as the Authority, recommended by the Canadian Public Sector Accounting Standards including the 4200 standards for

government not-for-profit organizations. Funds received in advance of the planned expenditure are disclosed as "Deferred

Contributions" and amounts once referred to, in a single disclosure component, as "Retained Income" have been disclosed as three

separate components of ‘Net Assets'. This disclosure clarifies the restricted/unrestricted nature of our net asset position.

At March 31, 2017 our cash was $1,698,756 higher and our accounts receivable balance was $1,527,624 lower than the previous year

balances. Knowing that our cash position was positive, additional inventories were produced at the end of the season for delivery in

the spring of 2017/18 to meet the anticipated early demand for products.

March 31 payables and accruals were slightly higher by $191,976 compared to 2015/16 as a result of having higher year end HST due.

Also included in the $1,475,788 balance is $494,002 ($455,050 in 2015/16) of provincial road maintenance funding that was

reimbursed to AFA for maintenance activities performed and then reimbursed by AFA directly to the forest industry in May 2017. The

Renewal Account balance of $3,050,709 ($2,935,404 in 2016) remains well above the minimum required balance of $1,500,000.

12

PUBLIC APPOINTMENTS – BOARD of DIRECTORS

DATE OF APPOINTMENT CURRENT TERM’S EXPIRATION CHAIR: David Stewart Cobden, ON

February 18, 2009

March 21, 2020

VICE-CHAIR: David Lemkay Douglas, ON

September 12, 2012

September 11, 2018

Sarah Bros North Bay, ON

February 1, 2013

January 31, 2018

Gordon Clark Coldwater, ON

June 30, 2016

June 29, 2019

Carl Corbett Huntsville, ON

June 22, 2016

June 21, 2019

Damion Ketchum Toronto, ON

August 4, 2016

August 3, 2019

Charles Lauer Peterborough, ON

January 5, 2015

January 4, 2018

Karen LeClerc Laurentian Hills, ON

November 10, 2005

December 13, 2017

Sarah Morgan-White Gloucester, ON

June 22, 2016

June 21, 2019

John Pineau Mattawa, ON

January 28, 2015

January 27, 2018

Rodney Smith Arnprior, ON

August 4, 2016

August 3, 2019

The total remuneration paid to Directors for this period is $ 24,600.

OFFICERS:

Jeffrey W. Leavey Timothy K. Doyle, CPA, CA

General Manager Secretary-Treasurer

GENERAL MEETINGS:

April 8 – 9, 2016 Huntsville, ON

May 19 – 20, 2016 Peterborough, ON

July 22, 2016 Algonquin Park, ON

October 27 – 29, 2016 Petawawa, ON

December 2 – 3, 2016 Huntsville, ON

February 3 – 4, 2017 Mattawa, ON

March 24 – 25, 2017 Huntsville, ON

13

ORGANIZATION CHART

Monitoring & Measurement Supervisor

Shaun Dombroskie, RPF Chief Forester

Gord Cumming, RPF

GIS Technician David Webster

Supervisor of Information and Communication

Peter VanderKraan

Invoice Clerk Carolyn Wood

Secretary/Receptionist Maggie Maw

Bookkeeper Jan McClentic

Treasurer Tim Doyle, CA

Operations Supervisor Dane Brown

Operations Supervisor Jim Turney

Woodlands Supervisor Marty Laflamme

Forest Technician Dave Peters

Area Forester Tracey Bradley, RPF

Area Manager Keith Fletcher, RPF

Office Coordinator Amy Baker

Operations Supervisor Evan Dombroskie

Road Supervisor Bob Coleman

Operations Supervisor Ed Wales

Operations Supervisor

Jeff Driscoll

Forest Technician

Ryan Lake

Area Forester Tom Dolan, RPF

Manager of Operations/ Pembroke

Stephen Bursey, RPF

General Manager Jeff Leavey

The Algonquin Forestry Authority

222 Main St. W. 84 Isabella Street, #7

Huntsville, ON P1H 1Y1 Pembroke, ON K8A 5S5

Tel: 705-789-9647 Fax: 705-789-3353 Tel: 613-735-0173 Fax: 613-735-4192

Huntsville.office@algonquinforestry.on.ca pembroke.office@algonquinforestry.on.ca

This publication is available in French upon request.

Sur demande, vous pouvez obtenir la version française de ce rapport annuel.

*** This publication has been printed on PEFC sourced paper.